Why Yahoo is finally taking a step in the right direction

Although news of layoffs and cost cutting is never a good sign for tech companies, there are some instances when such news arrives that may actually be a sign of good things to come.

According to The New York Times, Yahoo may be preparing to lay off hundreds of people in the coming weeks and focus on three parts of its business-- becoming a "starting point" for the most consumers on the Web; extending its advertising offerings to sites across the Web; and opening up Yahoo's technology infrastructure to third-party developers and publishers.

So what does this mean for me and you? It means that Yahoo may finally be taking a step in the right direction and realizing that the Google onslaught it has been forced to endure over the past few years will only get worse if it doesn't act now.

And based on what I saw from the company at CES, there are some signs that things may turn around.

At CES, I met with representatives from Yahoo's mobile division, who showed me prototypes of its new mobile platform, Yahoo Go 3.0, and its integrated iPhone functionality with the same platform.

Aside from a much improved interface, the company's latest mobile entrant revolves around widgets that are both customizable and extremely useful. Beyond that, the iPhone app was stellar, and I was quite pleased by how much the company could fit into a such a nice package.

That said, the most important part of our meeting was Yahoo's newly found reliance on the open-source community. For the first time, this company has realized that holding all of its IP close to the vest isn't doing anyone any good and it's time the users get in on the action.

Trust me--if you're a developer or you want to get in on the developing game, you'll like Yahoo's new policy.

But for all the good, Yahoo is still lagging far behind Google. The former is quick to cite its dominance over the latter in some countries overseas, but there's no debating the facts: Google's stock price is obliterating Yahoo's, Google is enjoying record profits, while Yahoo is floundering, and Google is easily one of the most powerful companies in the world. And for Yahoo to deny any of these facts is not only misguided, it's stupid.

But without saying it, Yahoo's Jerry Yang has finally realized that something must be done. And by instituting a significant cost-savings plan that revolves around layoffs and a refocused effort on the company's main avenues for growth, he may be on to something.

But in the end, can Yahoo really compete with Google? Sadly, I just don't think it can. Google has become synonymous with search and advertising, while Yahoo is being treated like the also-ran in North America. Is the Yahoo search good? Sure. Does Yahoo advertising perform relatively well? To some extent. But do either even stand up to Google? Not a chance.

At this point, Google has become such a major player in the industry, I simply don't see what Yahoo can do to turn the tide. Surely it can wrest some market share away from Google, but does it really have a chance at becoming the leader again? No way.

Yahoo is taking a step in the right direction and I commend the company for that. But with a giant still lurking and with relatively no prospects of taking it down to size, Yang and his cronies better have some tricks up their sleeves if they want to confront Google.